Speaking engagement with La Jolla Rotary Club
By far, one of the things I look forward to the most as The Hotel Guru is going out and interacting with people who are impacted by and interested in travel and the lodging industry. This week, I was invited to speak with 60 thought leaders at the La Jolla Rotary Club and reflect on the hospitality industry, its future and its influence on our economy. Here are some of the hot points that I highlighted:
RA Rauch and Associates
· My company, RA Rauch and Associates, has played many roles for more than 20 years. We are hotel developers, owners, managers, and also consultants for other hotel owners, lenders, developers.
· There are four levels of service: basic, expected, desired, and WOW. Stephen Covey of 7 Habits of Highly Effective People, referred to an emotional bank account that keeps guests returning to your business if you create that special “mojo” that is referred to by Chip Conley in his book, Peak.
· RAR targets “wow” customer service in EVERY guest interaction.
What matters now
· Revenue management, distribution channel management and social media marketing has changed the face of hospitality from art to science.
· Today’s consumer is wired and dangerous in this Internet age…social media drives five times the impact of traditional media or more!
· The economy – housing, unemployment and GDP – are all weak. Our present situation includes the rising oil prices, slowing global growth and shaky consumer confidence.
· The stock market drop in 2008 also caused a drop in hotel values. The net income dropped 40 percent and that is what drives value of real estate assets.
· The San Diego leading indicators were down in June, but we expect to come back on track and not dip into another recession.
Lodging Industry – local and national
· Most forecasters are calling for 6-8 percent revenue growth over both 2011 and 2012. Supply is constrained and occupancy approaching long term average of 60 percent.
· California is doing better in every way.
· San Francisco is leading the country with 20 percent revenue growth this year.
· In San Diego, we ran 66 percent at $121 in 2010, 68 percent at $126 in 2011 and should be at 70 percent at $134 in 2012.
· Revenue per available room (REVPAR) was up every month this year.
· There is virtually no new supply as construction loans are very difficult to obtain.
· The San Diego Convention Center expansion is a big topic on the table. The current plan being tested by Mayor Sanders and Steve Cushman is for a 3 percent hotel fee in the vicinity, 2 percent around a larger circle (estimated 5 miles away from the center) and 1 percent in areas like La Jolla and outlying regions.
· Another big topic on the table is the Chargers stadium downtown. There’s possible funds from the NFL’s G3 stadium subsidy program, naming rights sponsorships and redevelopment dollars (if it comes back from the state).
· San Diego is home to 56,000 hotel rooms and employs over 150K in the hospitality industry. We have arts, attractions, beaches, climate, gaming, restaurants, shopping, spas, sports and wineries.
· With all of these assets, many of which are available in La Jolla, how are we not busy outside of the summer?
· It takes marketing dollars, especially the funds provided by the Tourism Marketing District! La Jolla has done a great job with the limited dollars it has, but it is time to keep the San Diego Convention & Visitors Bureau accountable with their own La Jolla marketing efforts.
I ended with one of my favorite verses: “He who faileth to market, will perish” From the Gospel of Bob, Verse 3.
If you’d like to hear expert insight on the local and national lodging industry during one of your events, please give me a call. My team is happy to speak to your association or organization and are consistently quoted by local and regional media. You can reach me directly at [tel:858-720-9500] 858-720-9500 (office), [tel:858-663-8998] 858-663-8998 (mobile), rauch@hotelguru.com.
Talk to you soon,
Robert Rauch
Local Experts on Economic Impact of Del Mar Races
from the San Diego Business Journal July 18, 2011:
Among those seeing the strong seasonal benefits of racetrack visitors are local stores, rest
aurants and hotels.
“It provides a very steady boost during a summer season when we are already pretty full otherwise,” said hospitality consultant Robert Rauch, president of locally based R.A. Rauch & Associates Inc., which also operates two Hilton-bannered hotels in Carmel Valley.
Rauch notes that the prime impact on hotel demand is seen in the Del Mar, Sola- na Beach and Carmel Valley areas, though the “compression” of available rooms is also seen to an extent as far south as La Jolla and as far north as Encinitas.
Rauch said the Del Mar races have a large contingent of high-net-worth fans who in turn spend more on hotel restaurant meals, room service and other amenities. Read more…
Lenders Say ‘Yes’ to Hotel Financing, Experts Say
Good news was announced for hotel operators and owners interested in refinancing or acquiring a property.
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“Banks are lending,” said Ash Patel, president and COO at Premier Commercial Bank, at a recent hospitality investing conference. “We have money to lend and need to put it to work. We’ve had a very good track record with hotels.”
The Hospitality Investors Hangover Conference was hosted by R. A. Rauch & Associates, Inc in Irvine, CA in late June.
Attendees from Wells Fargo agreed, indicating that they also have money to lend to the hotel industry.
The main drivers of lender confidence in the lodging industry are the improved financial performance on a year-over-year basis and the outlook for growth in average rates.
“This is the first time since 2007 that lenders are starting to look at our industry,” said Robert Rauch, CHA and president of R.A. Rauch and Associates. “Typically, it takes a long run of success before they open the financial spigot. Premier understands that the next 3-5 years will be very strong.”
According to Smith Travel Research, 2010 hotel occupancies in the U.S. climbed five percentage points from 2009. Occupancy is up another five points in 2011. Average rates are up more than three percent this year, while they were flat in 2010.
In California, the news is even brighter with average rates up more than five percent this year. Along with average occupancy increases of seven percent, California’s revenue per available room (REVPAR) is up 12 percent. The San Francisco Bay Area is strongest in California at 20 percent REVPAR growth, followed by the Los Angeles metropolitan area at 12 percent and then San Diego, up eight percent in REVPAR.
Hotels represent a very attractive investment opportunity at this time because values had plummeted in 2009 and 2010 and the forecast going forward is very compelling.
Alan Reay, president of Atlas Hospitality, said, “There are some aggressive buyers out there now, led by the Real Estate Investment Trusts (REITS) who are buying based on future earnings.”
Top-tier and name brand properties in premium locations continue to be the easiest projects to secure financing, particularly in high barrier to entry markets, such as the east and west coasts. The development barriers include the cost of land, as well as approval processes.
“This conference shows that people are transacting, doing deals, even building in some cases,” said Natasha Perez, managing director of acquisitions and development for R. A. Rauch & Associates.
“This is a refreshing change from our last conference where the mood was depressing.”
SUMMARY OF HOSPITALITY INVESTORS HANGOVER CONFERENCE:
LENDING: Banks have liquidity and want to lend money. Location is crucial to lenders and brand names make a difference.
FORECAST: The next three years is looking bright for the hospitality industry, with a return to rates seen in 2007-2008, but with some inflation. There are no significant new developments in the near future, but perhaps in the next 2-3 years.
HOTEL MANAGEMENT: Management matters. The management company can help turn a property around to make it saleableor run it into the ground. A successful team is made up of a lawyer, tax professional, management company, lender, and broker.
R.A.RAUCH & ASSOCIATES
R. A. Rauch & Associates are specialists in the hotel sector, having built, owned and managed hotels, and consulted in the hotel sector for over 20 years. RAR focuses on hotel management, asset management, comprehensive hotel consulting and advisory services as well as expert witness work and litigation support. Assignments cover this complete range plus providing support to government agencies and financial institutions.
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San Diego Daily Transcript: “Sales pace of small hotel properties starting to accelerate”
from the San Diego Daily Transcript reporting on the Hospitality Investment Hangover Conference:
“You’ve had the sale of the Hotel Se, the Hyatt, the Hilton (Bayfront) and the W, but these aren’t all,” said hotel consultant and owner Robert Rauch. “We’re seeing an acceleration in the sales of all hotels.”
Rauch said while real estate investment trusts are picking up the trophy properties, with financing becoming much more plentiful, it has left room for smaller investors to make their moves.
North County Times: “Luxury hotels may encounter trouble if economy dips again”
From the North County Times reporting on the Hospitality Investment Hangover Conference:
“We are experiencing a bubble on the higher end of the market,” Alan X. Reay, president of Irvine-based Atlas Hospitality Group Inc. “Buyers have raised their expectations, but we won’t know if they’re right for another three or four years.” The big concern on luxury hotels is that their convention and meeting business is susceptible to an economic downturn, he said at a hotel conference in Irvine sponsored by R.A. Rauch & Associates, a San Diego-based hospitality management firm.
Read more: The North County Times
R.A. Rauch & Associates and the London Group Realty Advisors form Hospitality Partnership
Two prominent real estate strategic consultation firms with an alliance have formed a new brokerage venture focusing on hotel transactions.
R. A. Rauch & Associates and the London Group Realty Advisors have formed Hospitality Advisory Services, offering unique hotel and transient commercial brokerage services.
It’s not a new alliance, just an affirmation of what they have been doing all along.
“For more than 20 years we have worked together on many projects, including market & feasibility studies, strategic consultation assignments, development, asset management and litigation support,” state firm principal, Gary London. “Representing our clients to find deals and capital is a natural extension of our partnership.”
Principal Robert Rauch confirmed that, “This alliance acknowledges the synergy that makes us a ‘one-stop shop’ for our clients requiring the purchase or sale of hotels and distressed assets.”
Neither consultant is abandoning their “day job.” Rather, through this new brokerage effort, both industry experts intend to focus on connecting their clients and networks.
In addition to the brokerage emphasis, the merger of talent between the London Group and RAR offers clients comprehensive services, including:
- Underwriting, financial analysis
- Feasibility studies
- Asset management
- Bankruptcy & receivership consulting
- Development services
- Financial services
- Marketing
- Business plan development
- Expert witness testimony
- Operations staffing
- Placement of debt and equity
The new venture is initially targeting Southern California hotel buyers and sellers ranging from limited to full-service hotels.
“Presently, no focused hotel brokerage effort exists in this market,” said Rauch. “That is the niche that we intend to fill.”
| LONDON GROUP REALTY ADVISORS The London Group Realty Advisors is celebrating its 20th year serving the real estate industry providing strategic vision, analysis, capital and deal access to developers, investors, lenders, attorneys and public agencies. Clients include real estate developers, investors, owners of real property assets, financial institutions, businesses and public agencies. Assignments cover the entire range of real estate ventures including residential, commercial and mixed use projects. |
 Gary London |
| R.A.RAUCH & ASSOCIATES R. A. Rauch & Associates are specialists in the hotel sector, having built, owned and managed hotels, and consulted in the hotel sector for over 20 years. RAR focuses on hotel management, asset management, comprehensive hotel consulting and advisory services as well as expert witness work and litigation support. Assignments cover this complete range plus providing support to government agencies and financial institutions. |
 Robert Rauch |
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“Hotelier Bob Rauch Proves His Chops in Coronado Property” – San Diego Business Journal
Del Mar area hotelier Bob Rauch (he runs the hotelguru.
com website), whose firm has managed the boutique El Cordova Hotel in Coronado since Jan. 1, has performed a veritable miracle of sorts in difficult economic conditions. Read More…
Hyatt buys Woodfin hotel in Sorrento Mesa
from the San Diego Daily Transcript, May 20, 2011:
“Hyatt Hotels Corp. reported it has acquired three Woodfin Suites Hotels for a total of $76.5 million, including one at 10044 Pacific Mesa Blvd.
in Sorrento Mesa.” (Read more…)
ESCONDIDO: Missed financing deadline kills hotel deal
from The North County Times, May 17, 2011:
“A proposed downtown luxury hotel that Escondido has spent years planning and negotiating will not be built because the developer missed a May 14 deadline to secure financing, city officials said Tuesday.” (Read more…)
ECONOMY: Hotel construction picking up in North County
from The North County Times May 7, 2011:
“The hotel industry isn’t quite back to its boom times before the Great Recession, but improved revenue and occupancy rates are helping to fuel a wave of hotel construction in coastal North San Diego County cities.” (Read more…)